Approved OEM sources and supply chain modeling

Each part in PDXpert PLM software has a Source list,
which is a ranked set of approved manufacturer parts. This application note
suggests which sources should be included by the design team, and why
original equipment manufacturers'
parts are preferred over distributors' part numbers.

A part's approved sources list

Industrial, commercial and consumer products often combine
internally-designed and externally-sourced components. Screws, resistors,
paint, and other off-the-shelf items may be acquired from any producer that
fulfills the requirement.

Every purchased part in your warehouse has at least one, and preferably
several, approved original equipment manufacturer ("OEM") sources.
Multiple OEM parts are interchangeable
with each other when their relevant functional and physical properties are
equivalent. Part interchangeability — that is: form, fit, and function
equivalence — ensures that any approved source can be used for the
application.

Part qualification

Who creates & conforms to the specification?

One of product designers' principal tasks is identifying which items may
be sourced from outside the company, and then qualifying those sources to
ensure that they comply with the defined requirements.

The qualification activity generally requires a review of the OEM's
specifications, and possibly characterizing the part's performance
within the intended environment. There are several implications:

Functional and performance specifications are defined by the part's
OEM.

If the part meets requirements, it's the result of the original
OEM's engineering and production processes.

If the part fails to meet the published specification, only
the OEM can address the problem.

Of course, a local distributor often facilitates communications between
customer and OEM. But the distributor can't be more than a
facilitator: if you have a problem with the part meeting the published spec,
the distributor may give you a refund but certainly won't review the original
design documents, verify the production process, or write a corrective
action.

Engineering has qualified the OEM's part using the
manufacturer's technical data, and therefore must identify this item using
the OEM's name and part number.

Are distributor substitutions acceptable?

If the OEM's part has been qualified using the
manufacturer's technical data, does this mean that the OEM's
distributor will always provide that exact item? Or is it possible that the
distributor could provide an "equivalent" item?

When a designer specifies a distributor's part number, the implication is
that this part (organization + number) has been qualified. For very complex
parts, the distributor will invariably fulfill the order using the
OEM's exact part: no distributor will treat AMD and Intel processors as
equivalent and interchangeable under the same part number. On the other
hand, simpler parts (screws and other hardware, perhaps ribbon cable or even
resistors) may be deemed equivalent between OEMs. If a distributor switches
alliances, and you refer to the
distributor's number, then it's the distributor's judgment whether they can
substitute one source for another. After all, you're ordering the
distributor part number, not the manufacturer's number.

If a distributor's part has been separately qualified using the
distributor's own specifications, then buyers can rely upon the
distributor's part number. However, a distributor part number may not be a
reliable indicator of the part's specifications, and the distributor part
number shouldn't be listed as a qualified source.

Identify the primary suppliers within the PLM system

Although the PLM system must accurately and completely reflect all
necessary requirements, we want to provide as much flexibility as possible.
Equally important, we'd like to avoid insignificant changes to the product
definition, such as adding a new distributor of a previously-qualified part.

In general, Engineering qualifies responsible
manufacturers
and their assigned part number / datasheet. Engineering decides how the part
performs, but not how the part is obtained.

Purchasing must
choose the best way to obtain the qualified part, and this choice is
affected by the dynamics of business relationships, contracts, schedules,
packaging options, shipping rates, payment terms and (especially) prices. If a new
distributor can offer better terms, or quicker delivery, then the decision is
within the scope of production rather than design, and no engineering
participation is expected.

When to include distributors or intermediate suppliers

Recommending distributors

While it's usually better to avoid formalizing supply chain details
within the product definition, designers often have useful knowledge about
where parts can be acquired. To communicate this knowledge, designers can
add supply chain recommendations to assist their purchasing
colleagues.

If identifying source recommendations would be helpful, then there are
several alternatives.

Add
the distributor's name into a custom
attribute field based on the Organizations collection, and the part number
based on a text custom attribute. You can choose how many distributor
name/number pairs to maintain (perhaps
Distributor1 / DistNumber1;
Distributor2 /
DistNumber2; ...). Since custom attributes are
item-level properties, updates won't require a change form.

Use the OEM part's general-purpose Notes
field to add an arbitrary number of distributors with their part
numbers.

The principal advantage of tying the distributor to the OEM part, rather
than the home part, is that adding or removing a manufacturer's part
automatically adds or removes references to the related distributors' parts.

However, if you need to track distributors under revision control, or the
distributors must be included in PDXpert's standard BOM with Sources report,
then use the source's rank to
distinguish your truly qualified OEM part(s) from indirectly qualified
distributor part(s). For example, you may want to establish a rule that all
indirectly-qualified sources are assigned ranks higher than, say, 20. If you
include recommendations on your Sources list, any updates would require processing a change form.

Although a recommended distributor may appear as a source, it must be
understood that the first-ranked OEM parts actually fulfill engineering's
requirements. The buyer remains responsible for ensuring that the
recommended distributor part is, in fact, the qualified manufacturer part, and
that the distributor is not providing a non-qualified substitute.

Identifying a distributor's value-added service

A distributor may provide a value-added service such as preparing cable
assemblies, programming flash memory or trimming a part parameter to a specific
value. These modified parts aren't considered the original manufacturer parts, and
would be assigned unique distributor part numbers that represent the original
part source as modified by the process applied by the distributor.

Qualifying contract manufacturers

For internally-developed design parts that are sent to a contract
manufacturer (CM), there's a useful shortcut. Usually Engineering qualifies a CM
for some set or style of parts, and Purchasing purchases from the CM using the
Engineering-assigned internal part number.

In this case, you don't need to create a separate manufacturer source record for
each of your CM parts. You can simply create a single record with that CM as
owner and a part number such as Approved. Apply this
record as the source for all parts that the CM is qualified to provide.

This avoids having to create a duplicate partner record for each home
designed part. Each home part displays which CMs can produce it. The CM's
Approved record's AppearsOn:Source list shows what parts
each CM is
qualified to produce.

Contact us if you'd like to discuss how the
general concepts in this note may be applied to your situation.
We'd be happy to address other PLM software good practices — ask us!